Viewpoints: January/February 2014

What’s Coming with Track and Trace


On Nov. 27, 2013, President Obama signed the Drug Quality and Security Act (DQSA) into law. Although a large portion of the act (H.R. 3204) deals with the quality of compounded pharmaceuticals, Title II of DQSA discusses new requirements surrounding track and trace. The key provisions of the act will be phased in over the next 10 years and will make it easier to trace where a drug has been in the supply chain; detect and remove counterfeit drug products; and facilitate drug recalls when necessary. Here we discuss provisions of the act that will go into effect from 2014 to 2017. The next issue of ComputerTalk will discuss the implementation requirements that are slated to go into effect in 2017 and beyond.

One of the first requirements under the act is that the Secretary of Health and Human Services issue draft guidance by May 24, 2014, that establishes standards for exchanging transaction information, transaction history, and transaction statements in either paper or electronic format. Starting Jan. 1, 2015, manufacturers must provide this transaction information, history, and statement to subsequent drug owners. Starting in 2015, all parties may only transfer drug products to other authorized trading partners, thus enabling better tracking of which facilities can be involved in the drug supply chain. Wholesalers, third-party logistics providers, and pharmacies are considered “authorized” if they are licensed according to their states’ law. Manufacturers, while not licensed, must annually register with the secretary in order to be authorized. 

The act calls on manufacturers, primary and secondary wholesale distributors, repackagers, third-party logistics providers, and dispensers (pharmacies) for their input and cooperation as the system is developed over the next 10 years. Once public input has been taken into account, final standards must be published by Nov. 27, 2014. These standards will establish methods for exchanging transaction information, including the following metrics: 

• Proprietary or established name of drug product. 
• Drug’s strength and dosage form. 
• NDC. 
• Container size. 
• Number of containers. 
• Lot number. 
• Date of transaction. 
• Date of shipment if more than 24 hours after transaction date. 
• Business name and address of the person from whom ownership is being transferred. 
• Business name and address of person to whom ownership is being transferred.


The transaction history furnished to the subsequent owner must include this transaction information for every prior transaction, going back to the manufacturer, and it must be accompanied by a transaction statement. The transaction statement shows in paper or electronic format that the transferring party: 

• Is authorized as required by the act and received the product from an authorized source. 
• Received transaction information and a transaction statement from the prior product owner. 
• Did not knowingly ship an illegitimate product. 
• Did not knowingly provide false or altered transaction information. 
• Had systems and processes in place to comply with verification requirements. 


Although manufacturers must provide the transaction history, transaction information, and transaction statement to subsequent owners starting in 2015, this information may be provided in either paper or electronic format. If manufacturers fail to supply this information, the act states that wholesale distributors should not accept ownership of the product. For manufacturers choosing to provide this documentation in paper format, the burden of all of this data may be overwhelming, especially considering that manufacturers must retain this information for at least six years. While manufacturers are not required to provide this information in electronic format until Nov. 27, 2017, earlier adoption of this transfer modality will facilitate an efficient implementation. 

Moving a large amount of paper through the supply chain between 2015 and 2017 may not be feasible and could cause the system to collapse. One possible solution to the paper dilemma would be for all parties to adopt electronic formats initially, although this is unlikely due to the short implementation timeline. Further confusion may be caused if one party taking part in a product transaction has electronic functionally but the other does not. This could pose problems for both parties and make transactions even more cumbersome. 

With so much focus on manufacturer and wholesaler requirements, it may be difficult to see how individual pharmacies fit into this picture. Before May 2016, the secretary will enter into a contract with a private, independent consulting firm with the expertise to conduct a technology and software assessment that looks at the feasibility of dispensers with 25 or fewer full-time employees conducting interoperable, electronic tracing of products at the package level. Although the firm’s assessment does not need to be completed before 2022, the outcome of this assessment could have a big impact on requirements placed on independent pharmacies. Based on their assessment, pharmacies could be required to urchase and install additional software and hardware to handle the track-and-trace requirements. 

Alternatively, pharmacies may enter into a written agreement with a third party to maintain the necessary data. Most likely, this would mean that pharmacies would enter 
into an agreement with their wholesale distributor to maintain the data for them, alleviating most of the burden for individual pharmacies. The cost of such a service 
is unknown, but with smaller profit margins and more difficulty implementing changes, independent pharmacies will be concerned with yet another expense, and these expenses may lead to additional consolidation.

Federal Preemption

DQSA preempts any current state-initiated track-and-trace or pedigree laws, and it states that “no State or political subdivision of a State may establish or continue in effect any requirements for tracing products through the distribution system… which are inconsistent with, more stringent than, or in addition to, any requirements applicable.” For states that have already established pedigree laws, such as Florida and California, their previous efforts may now be meaningless. Florida’s previous pedigree law was riddled with problems. It was a paper-based system without any manufacturer requirements. Pharmacies could return products within seven days without updating the product’s pedigree, and serial numbers were not required. However, for California, whose e-pedigree law was slated to take effect starting Jan. 1, 2015, the change may be felt more deeply. Despite the fact that these states must now change their requirements, a uniform national system will be more effective at preventing illegitimate products from entering the distribution channel. Hopefully, Florida’s paper-based system is not a model for the new national system. 

The accompanying table, on next page, provides the timeline for key parts of the legislation in the next three years, based on time estimates provided in the law. The full implementation of the track-and-trace legislature will take effect over the next 10 years. In the next issue of ComputerTalk, we will explore the implementation implications beyond 2016. CT 


Ann Johnson, Pharm.D., began working for PHSI as an intern in 2010 and is now the newest pharmacist consultant on the team. She has experience in independent retail pharmacy, as well as specialty, clinical, industry, and ambulatory-care pharmacy. Although working on a variety of projects, Johnson’s current emphasis is in analytics and pricing reimbursement, financial models, and market research. The author can be reached at ajohnson@phsirx.com. 

Timeline for Key Parts of DQSA in The Next Three Years

Nov. 27, 2013 

The Drug Quality and Security Act (DQSA) signed into law. No state or political subdivision of a state may establish or continue in effect any requirements for tracing products through the distribution system that are inconsistent with or more stringent than, or in addition to, any DQSA requirements. 

May 24, 2014 

The secretary of Health and Human Services shall issue guidance document to aid trading partners in identifying suspect product and notification termination.

Nov. 27, 2014

Standards published for the interoperable exchange of transaction information, transaction history, and transaction statements in paper or electronic format. The first public meeting to enhance safety and security of distribution supply chain and provide for comment. A facility of a third-party logistics provider shall report to the secretary on an annual basis.

Jan. 1, 2015 

Manufacturers must provide subsequent owners with transaction history, transaction information, and transaction statement in paper or electronic format, and manufacturers must retain this information for not less than six years. Wholesale distributors, dispensers, and repackagers cannot accept ownership of a product unless the previous owner provides a transaction history, transaction information, and transaction statement. Trading partners of a manufacturer, wholesaler, dispenser, or repackager may only be authorized trading partners. Manufacturers, wholesalers, dispensers, and repackagers should have systems in place to quarantine suspect products. Any person who owns or operations an establishment that engages in wholesale distribution shall report to the secretary on an annual basis pursuant to a schedule determined by the secretary. The secretary shall establish a database of authorized wholesalers.

Nov. 27, 2015 

The secretary finalizes guidance specifying whether and under what circumstances products without product identifiers already in the supply chain are exempt from product tracing. Establish regulation standards for licensing wholesaler distributors, including revocation, reissuance, and renewal of such license. The secretary shall issue regulations regarding standards for licensing third-party logistics providers based on the accreditation program. 

May 24, 2016 

The secretary shall enter into contract with a private, independent consulting firm with expertise to conduct a technology and software assessment that looks at the feasibility of dispensers with 25 or fewer full-time employees conducting interoperable, electronic tracing of products at the package level.


Health Market Science
McKesson Pharmaserv

 

April 13-16, 2013
American Pharmacists Association

April 25, 2013
American Society for Automation

May 8-10, 2013
National Community Pharmacists’ Association

Complete Calendar